March 23, 2021
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayers”) for the taxable year ended December 31, 2016.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, may have been required to file a Virginia income tax return for the 2016 taxable year. A review of the Department’s records showed that the Taxpayers had not filed a return. The Department requested additional information from the Taxpayers in order to determine if their income was taxable in Virginia. When a response was not received, the Department issued an assessment. Thereafter, the Taxpayers filed a Virginia part-year return indicating that they had moved to Virginia from ***** (State A) in August 2016. Upon review, the Department determined the Taxpayers were domiciliary residents of Virginia for the entire 2016 taxable year. The return was adjusted and an assessment was issued. The Taxpayers appeal, contending their part-year return was filed correctly and request the assessment be abated.
DETERMINATION
Domicile
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual’s expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real or tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person’s domicile. A person’s true intention must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Department determines a taxpayer’s intent through the information provided. A taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayers have provided evidence that they maintained a rented personal residence in State A until July 2016, at which time they purchased a residence in Virginia and relocated there. They maintained State A driver’s licenses and vehicle registrations until July 2016, when they obtained Virginia driver’s licenses and vehicle registrations. Tax documents for the 2016 taxable year were mailed to a Virginia address, which is consistent with the Taxpayer’s statements of having moved to Virginia in August 2016. Following the move to Virginia, the Taxpayers continued to work for an employer based in State A. The actions indicated a strong intent to change their domicile from State A to Virginia.
Part-Year Residents
Virginia Code § 58.1-303 provides that a taxpayer who becomes a resident of another state during the taxable year is subject to taxation for the period in which they were a Virginia resident. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, part-year residents may claim a portion of their Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, part-year residents may claim a prorated Virginia standard deduction if they claim the standard deduction for federal income tax purposes. See Public Document (P.D.) 14-67 (5/20/2014).
Pursuant to Virginia Code § 58.1-303, part-year residents are subject to tax only on their income that is attributable to Virginia. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 B specifically defines income attributable to Virginia as “that which is received during the portion of the year in which the individual is a Virginia resident”. Taxpayers that are part-year residents are required to file Virginia part-year income tax returns if they have taxable income earned while they resided in the Commonwealth.
CONCLUSION
After carefully considering the information provided, I find that the Taxpayers became domiciliary residents of Virginia in August 2016. As permitted by statute, they were eligible to file as a part-year resident for the 2016 taxable year. Therefore, the Taxpayers 2016 part-year return should be processed and the assessment will be adjusted accordingly.
The Code of Virginia sections, regulation, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3432.A